Thursday, November 13, 2014

SPX 2-Hour Chart Overbot Negative Divergence Tight Bands to Squeeze Out Big Move

The 2-hour chart only receives a mini-spankdown form the red negative divergence. The central banks are powerful. Japan is goosing the markets the last couple days on news that the sales tax hike will be delayed. A firm decision is coming next week but traders expect a weak GDP number on Monday which will delay the sales hike. Thus, Banzai! The dollar/yen moves higher to 115.63 so the weaker yen creates market lift. The VIX remains low at 13 also creating market fuel. The bulls want to party through New Year's and keep pumping stocks higher.

Interestingly, the Thursday the week before OpEx is typically volatile so the day may become more interesting. The red rising wedge, overbot conditions and negative divergence create the pull back but the bears did not have much juice. The SPX is back up printing a new all-time high at 2044.34. As Casey Casum would say, "the hits keep on coming." The maroon lines show the higher price with negative divergence remaining for the indicators. The stochatics are trying to squeeze out more upside juice for price. The same expectation remains for a spank down to occur.

Are you ready for some excitement? Well, get ready. Remember the tight standard deviation bands (pink) for the 2-hour a couple-few days ago? Keystone said it was very odd that price moved sideways when a 15 to 30 handle move would be expected with the SPX up or down (the tight bands squeeze out the big move but do not predict direction). The reason that price moved sideways is that it planned to squeeze in with even tighter bands. So there is a big move at the door step. The VIX drops under 13 down to 12.89 and its standard deviation bands are extremely tight on the 2-hour chart as well. For the bulls and bears, one side is going to be extremely happy at the end of today and the other side very sad. The decision is being made now as the bands will squeeze out the big move for today into the weekend.

As this is typed, equities are printing at the highs and running higher hinting at the upside breakout. The SPX prints a new all-time high at 2045.79 so it looks like the bulls may squeeze out an upside orgy move, however, price needs to play out into the early afternoon before the direction is firmly known. Price is exactly at the upper band now so either the bears push back right away, now, immediately, or they will crumble. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 10:41 AM: The SPX prints a new all-time record high at 2045.86. The bulls crack open the champagne and celebrate a never-ending bull market. VIX 12.91. A big market direction decision is occurring. The SPX 1-hour chart bands squeezed in yesterday and are pushing price higher today. Ditto the 30-minute chart. Price is above their upper bands on those charts. Since the 1-hour chart has long and strong indicators it may take one to three candlesticks for the upside energy to burn off--if it burns off; so that would be by 2 PM or so. The bulls are powerful. The bears have to eat some spinach like Popeye and push back hard before lunch or they will fall down the steps. Despite all this drama, remember that the daily chart last posted wants to see higher highs after any pull back in the daily time frame so a firm market top would not be likely until next week. The indicators on the daily chart are negatively diverged except for RSI and MACD line that wants the higher high after a pull back. The upside momo for such a drastic parabolic move in price needs time to dissipate.

Note Added 10:54 AM: Dollar/yen 117.52. Banzai! VIX 12.88. SPX 2046 with the bulls starting to break out higher. The SPX prints a new all-time high at 2046.18. The MACD lines print a positive cross for the SPX 1-hour chart which provides bull fuel. The bulls probably want 2050 since it is less than four points away. Bears have to flex their muscles immediately but they already have one foot on a banana peel and are waving their arms wildly to keep their balance.

Note Added 11:35 AM on Friday, 11/14/14: The bears stage a comeback yesterday pushing the VIX higher but are unable to gain any traction unless the VIX remains above 14 and moves higher. Amazingly, the standard deviation bands on the 2-hour chart are squeezing in even tighter with only an 11-point range at 2031-2043 now existing and price is at 2040. To repeat the above, something huge is at the doorstep either today or for the Monday opening bell. The bands are so tight you would think the sharp move would begin at any time, today, however, since equities have been maintaining buoyancy due to the news reports on the tax hike delay in Japan, traders may be willing to wait for the Japan GDP data Sunday evening US time. Traders expect a very weak Japan GDP which will cause a delay in the sales tax hike and the yen will weaken, dollar/yen will move higher, and Japan and US stocks will move higher. Some of this move is already priced in this week preventing the indexes from falling. So traders may be willing to wait for that critical GDP number. The presumption remains down for the SPX but in these central banker-controlled markets you never know. There may be a news event that is a catalyst that kicks in the quick and sharp move expected from the tight standard deviation bands. G20 leaders are meeting this weekend in Brisbane. Putin is flexing his muscles in Ukraine. A new Ebola patient is coming to the US. So there are these and other events on tap, mainly Japan GDP. SPX is probably going to move 20 or 30 handles or more by early next week. Watch VIX 14.21 and JJC 37.01. Bulls need JJC 37.01 to bless the upside breakout. Bears need VIX 14.21 to stop the upside move in stocks and begin the downside selling. SPX 2039. VIX is at 13.64. JJC is at 36.66. The drama continues. Watch volatility and copper to see who wins.

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